With the assistance of Google translate, we know that Edwards said the U.S. is already in a recession, and that investors are underestimating the risks underlying the American economy. And this is bad news for corporate profits:

While the consensus continues to expect growth of around 2.5% this year, the economy has entered a recession with GDP declining by as much as 2%. This would cause a sharp drop in income of companies, up 30% to 40%. Company margins (based on operating results) are now at their historical highs. Profit warnings should therefore be multiplied throughout the season for publications that summer that has just begun. Excluding financials, profits of U.S. companies have already begun to decline in the second quarter (-0.3% expected according to the consensus, Ed). And it is only the beginning!

Indeed, it’s just the beginning. He warned that the elections, the fiscal cliff, and low trading volumes could cause stocks to collapse.

“The S & P 500 could reach its lowest since March 2009 to 666 points (an index halved), in the coming months,” he said. “And other global markets may be affected.”

And his take on China is not much better. We just learned that China’s economy slowed to 7.6% GDP growth. Some suggest that a hard landing for the Chinese economy would occur if it slowed to around 5% growth. Edwards estimates are much more bleak:

All elements of a global recession are in place. China may suffer a sharp slowdown, while the Chinese authorities, who see the first signs of deflation, will also lose control over growth. More and more statistics will worry investors in the coming weeks. China’s GDP may slow to 3% or less.

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